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Investing.com -- Citi believes the Japanese yen has reached a turning point against the U.S. dollar, shifting from long-term weakening to strengthening after last summer’s sharp fall in the USD/JPY pair. The bank now sees USD/JPY forming a triangle top pattern with boundaries between ¥140/$ and ¥160/$.
The USD/JPY pair has developed a descending formation in recent months, performing weaker than Citi initially expected. Meanwhile, the EUR/JPY has shown unexpected resilience, remaining above its 200-day moving average of approximately ¥161/€.
This divergence indicates the U.S. dollar’s weakness is more pronounced against currencies like the euro than against the Japanese yen. The pattern aligns with the current global market environment, which Citi characterizes as modestly reflationary.
The U.S. economy continues to slow gradually without significant deterioration, while both U.S. interest rates and equities have plateaued. These conditions, combined with overall dollar sluggishness in foreign exchange markets, have reinforced the reflationary market environment.
Citi analysts note that the yen’s underperformance against the euro and other currencies is not surprising under these circumstances. They believe a market risk-aversion event, such as an equity market decline, would be necessary in the short term to trigger broad yen appreciation against multiple currencies.
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